Ever feel like buying property here in Australia is getting out of hand?
The eighth annual Demographia International Housing Affordability Survey confirms it. This article from ABC News states that Australian homes are one of the least affordable in the world. Bad news for real estate investors – that is unless you are willing to explore international markets. Here are some of the highlights.
“Australian Homes Still Among Least Affordable”
Published by The World Today
The report put Australia well behind the United States, Ireland, Canada, the United Kingdom and New Zealand in its ranking of the most affordable places to own a home. The median-priced house in Australia’s major cities is an average of 6.7 times the median household income. Only Hong Kong’s housing was more expensive, at 12.5 times median income, while New Zealand was just behind Australia at 6.4.
Within Australia, Sydney easily retained first place as the most unaffordable city, with the median house price 9.2 times median household income. That made Sydney the third least affordable city in the study after Hong Kong and Vancouver, but other Australian cities did not fare much better.
The study’s co-author Wendell Cox, principal of Demographia, lays the blame for soaring home prices squarely on a lack of land release and too much regulation restricting development.
“It has to do with land-use regulation,” Mr Cox said. “You have the philosophy of urban consolidation, which has drawn strict borders around cities like virtually all of your large capital cities, so that it is impossible really to build much on the fringe of the cities. Basic economics tells us that any time you create a shortage of anything – whether it is land, or cars, or whatever it happens to be – you are going to drive the prices up.”
Real estate analyst Tim Lawless, from rpata.com, agrees that land restraints are driving prices up but he says other factors cause Australian prices to be higher than those in the United States.
“Geographically, we are quite a unique nation,” he said. “We have virtually 50 per cent of Australia’s population across the three major capital cities, for example. We have very tight urban densities in those cities and we have very little opportunities for employment outside the capital cities.”
That could be one reason why Mr Cox is not sure whether the Australian housing bubble will burst.
“There is no question that Australian housing is incredibly overvalued by any sort of international standard,” he said. “Whether it bursts or not, that is beyond my ability to really predict.”
